I don’t want to be one of those people they’re always talking about that come on to biggerpockets, ask a few questions and then disappear. I’m in this real estate thing for the long haul and I’m not going anywhere.
Since my last post I actually found an investor here on biggerpockets and although we haven’t bought a house to flip with him, it’s not for lack of trying.
However, I have a family investor with whom we recently won a house to flip on xome.com and are just waiting on a change in the contract and we’re scheduled to close December 10th.
45 days ago me and the hubby went to breakfast and wrote down all of our goals. They are reasonably attainable and include flipping one house and purchasing one multifamily (as well as hire two more people for our remodeling company) in one year. With 320 days left it looks like we might be under contract on a flip, we hired one more person (although we’re still netting the same because we let someone else go) and I now have my eye on a multifamily… only it’s not a 1-4 unit. It’s two separate parcels but the buildings are attached.
The apartments need TLC so I would look at this as a value add property. We’d rehab the apartments as they come vacant.
The 4 unit is asking $199,900 and the 9 unit is asking $725,000 for a total of 13 units for $925,000.
4 Unit grosses $32,160 with the following expenses (let me know if I missed something, first column is yearly, second is monthly):
| Taxes | $7,422.00 | $618.50 |
| Trash | $1,440.00 | $120.00 |
| Sewer | $2,134.07 | $177.84 |
| Insurance | $2,500.00 | $208.33 |
| Vacany 5% | x | $134.00 |
| Management 10% | x | $268.00 |
| Utilities/Lawn/Water | $1,868.49 | $155.71 |
| Maintenance 10% | x | $268.00 |
| Total Costs | x | $1,950.38 |
$1950.58 x 12 months = $23,406.96 yearly expenses.... doesn't that seem high for a 4 unit?!
9 Unit grosses $75,485 (let me know if I missed something, first column is yearly, second is monthly):
| Taxes | $10,728.00 | $894.00 |
| Trash | $3,960.00 | $330.00 |
| Water and Sewer | $4,716.63 | $393.05 |
| Insurance | $2,500.00 | $208.33 |
| Vacany 5% | x | $34.64 |
| Management 10% | x | $623.57 |
| Utilities/Lawn/Water | $860.56 | $71.71 |
| Maintenance 10% | x | $69.29 |
| Total Costs | x | $2,624.59 |
$2,624.59 x 12 months = $31,495.08
Total gross income for the 13 units is $107,645. Total expenses is $54,905.04.
We estimate based on market rents we can increase this to $133,000 after turning over all units… and I still feel like I’m being light with that number.
Lastly, a 12 unit just down the street sold for $814,000 grossing $120,000 per year with way less taxes. Total taxes on the 13 units is $18,150 and the 12 unit taxes are only $6,026! I think I could appeal the taxes as well.
So I also did my research on the seller. I’m located in Pennsylvania, the seller's own a few properties here in PA, a lumber yard another 12 unit building and own a 2 million dollar house in Virginia. The 9 unit property has been in their family since 94 when they bought it for $340,000. Doesn’t look like any other mortgages were taken out on the property so there’s plenty of equity. The 4 unit was purchased in 1999 for $130,000.
We obviously don’t have that kind of money just laying around so we’re thinking of asking for seller financing. My main concern is, how do I make sure the mortgage is getting paid if I pay the seller? Couldn’t they just pocket all my money and let the bank foreclose on the house?
What should I even offer? I came up with a max offer of$160,000 for the 4 unit and $655,000 for the 9 unit for a total of $815,000. But I also have to remember that almost all the units need rehabbing!
As a side note also plan to manage these ourselves in the short term to get more experience. I was a property manager for a large corporate company for four years, managing hundreds of units and we currently own one multifamily. We also own a remodeling company so we'll be remodeling at cost. I am also a real estate agent and will get a 2.5% commission... although should I offer something to the listing agent to get the deal done?
